EXAGEN INC.

Previous wording

The following discussion and other parts of this Quarterly Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, current and future product offerings, reimbursement and coverage, the expected benefits from our partnership or promotion arrangements with third parties, research and development costs, timing and likelihood of success and plans and objectives of management for future operations, are forward-looking statements. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, and short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item IA, "Risk Factors" in our 2024 Annual Report and Part II, Item 1A, “Risk Factors” in this Quarterly Report. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Current wording

The following discussion and other parts of this Quarterly Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, current and future product offerings, reimbursement and coverage, the expected benefits from our partnership or promotion arrangements with third parties, research and development costs, timing and likelihood of success and plans and objectives of management for future operations, are forward-looking statements. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, and short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item IA, "Risk Factors" in our 2024 Annual Report. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Previous wording

Under the leadership of our Chief Executive Officer, John Aballi, who joined Exagen in October 2022, we are executing an operational turnaround of the business, resulting in a return to revenue growth and gross margin expansion while significantly reducing operating expenses and cash burn.

Current wording

Under the leadership of our Chief Executive Officer, John Aballi, who joined Exagen in October 2022, we have executed an operational turnaround of the business, resulting in a return to revenue growth and gross margin expansion while significantly reducing operating expenses and cash burn.

Previous wording

Since launching AVISE® CTD, we have produced an extensive body of peer-reviewed literature supporting the test’s clinical validity and utility, demonstrating the importance of AVISE® CTD in patient care. Revenue from this product comprised 91% and 90% of our revenue for the six months ended June 30, 2025 and 2024, respectively.

Current wording

Since launching AVISE® CTD, we have produced an extensive body of peer-reviewed literature supporting the test’s clinical validity and utility, demonstrating the importance of AVISE® CTD in patient care. Revenue from this product comprised 89% and 91% of our revenue for each of the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

▪Lupus Nephritis (LN) Biomarkers. We continue to leverage our intellectual property licensed from Johns Hopkins University to develop a test for detecting protein analytes in urine that can aid rheumatologists in the ongoing management and risk stratification of patients suffering from LN. We are currently testing a new customized array and currently expect to have results of this testing in the third quarter of 2025. We expect to make this panel available initially through Pharma collaborations for research use prior to releasing commercially through our clinical lab.

Current wording

▪Lupus Nephritis (LN) Biomarkers. We continue to leverage our intellectual property licensed from Johns Hopkins University to develop a test for detecting protein analytes in urine that can aid rheumatologists in the ongoing management and risk stratification of patients suffering from LN. We are currently testing a new customized array and currently expect to have results of this testing in the fourth quarter of 2025. We expect to make this panel available initially through Pharma collaborations for research use prior to releasing commercially through our clinical lab.

Previous wording

▪Kidney Damage Biomarkers. We have developed a four-protein blood-based panel, which sensitively detects kidney damage in early LN and diabetic nephropathy which significantly outperforms creatinine and eGFR. A provisional patent application was filed in November 2024 for methods of detecting kidney damage using the blood-based panel. We continue to expect to make this panel available initially through Pharma collaborations for research use prior to releasing commercially through our clinical lab.

Current wording

▪Kidney Damage Biomarkers. We have developed a four-protein blood-based panel, which sensitively detects kidney damage in early LN and diabetic nephropathy which significantly outperforms creatinine and eGFR. A provisional patent application was filed in November 2024 for methods of detecting kidney damage using the blood-based panel. An additional patent was filed in May 2025. We continue to expect to make this panel available initially through Pharma collaborations for research use prior to releasing commercially through our clinical lab.

Previous wording

▪Reimbursement for Our Testing Products. Our revenue depends on achieving broad coverage and reimbursement for our tests from third-party payors, including both commercial payors and government payors. Payment from third-party payors differs depending on whether we are considered a "participating provider" (have entered into a contract with the payors as a participating provider) or a "non-participating provider" (do not have a contract and are considered a "non-participating provider"). Payors will often reimburse non-participating providers at a lower amount than participating providers, if at all. We have received a substantial portion of our revenue from a limited number of commercial payors, most of which have not contracted with us to be a participating provider. Historically, we have experienced situations where commercial payors proactively reduced the amounts they were willing to reimburse for our tests, and in other situations, commercial payors have determined that the amounts they previously paid were too high and have sought to recover those perceived excess payments by deducting such amounts from payments otherwise being made. When we contract to serve as a participating provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. If we are not able to obtain or maintain coverage and adequate reimbursement from third-party payors, we may not be able to effectively increase our testing volume and revenue as expected. Additionally, changes in our estimated reimbursements for tests performed in prior periods can positively or negatively impact our revenue in the current period and cause our financial results to fluctuate. In addition, in connection with our revenue cycle management initiatives, we held claims in the first half of the fiscal year ended December 31, 2024, which resulted in increases in our accounts receivable and an accelerated decrease in our cash in the same period. As expected, this trend reversed in the second half of the fiscal year ended December 31, 2024 as cash was collected on billed tests. We held claims in the first quarter of the fiscal year ending December 31, 2025, which resulted in increases in our accounts receivable and an accelerated decrease in our cash in the same period and a reversal of that trend is expected in the remaining two quarters of the fiscal year ending December 31, 2025.

Current wording

▪Reimbursement for Our Testing Products. Our revenue depends on achieving broad coverage and reimbursement for our tests from third-party payors, including both commercial payors and government payors. Payment from third-party payors differs depending on whether we are considered a "participating provider" (have entered into a contract with the payors as a participating provider) or a "non-participating provider" (do not have a contract and are considered a "non-participating provider"). Payors will often reimburse non-participating providers at a lower amount than participating providers, if at all. We have received a substantial portion of our revenue from a limited number of commercial payors, most of which have not contracted with us to be a participating provider. Historically, we have experienced situations where commercial payors proactively reduced the amounts they were willing to reimburse for our tests, and in other situations, commercial payors have determined that the amounts they previously paid were too high and have sought to recover those perceived excess payments by deducting such amounts from payments otherwise being made. When we contract to serve as a participating provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. If we are not able to obtain or maintain coverage and adequate reimbursement from third-party payors, we may not be able to effectively increase our testing volume and revenue as expected. Additionally, changes in our estimated reimbursements for tests performed in prior periods can positively or negatively impact our revenue in the current period and cause our financial results to fluctuate. In addition, in connection with our revenue cycle management initiatives, we held claims in the first half of the fiscal year ended December 31, 2024, which resulted in increases in our accounts receivable and an accelerated decrease in our cash in the same period. As expected, this trend reversed in the second half of the fiscal year ended December 31, 2024 as cash was collected on billed tests. We held claims in the first quarter of the fiscal year ending December 31, 2025, which resulted in increases in our accounts receivable and an accelerated decrease in our cash in the same period and a reversal of that trend is expected in the remaining quarter of the fiscal year ending December 31, 2025.

Previous wording

▪Expanding Adoption of AVISE® CTD. Since the launch of AVISE® CTD in 2012 and through June 30, 2025, we have delivered over one million of these tests. During the three months ended June 30, 2025, the number of AVISE® CTD tests delivered increased by approximately 7% over the same period in 2024 and increased by approximately 14% over the first quarter of 2025. Revenue growth for our testing products will depend, in part, on our ability to continue to expand our base of ordering healthcare providers and increase our penetration with existing healthcare providers, and on the success of the T-Cell Biomarkers and RA Sub-Profile Biomarkers which we added to our AVISE® CTD tests in January 2025.

Current wording

▪Expanding Adoption of AVISE® CTD. Since the launch of AVISE® CTD in 2012 and through September 30, 2025, we have delivered over one million of these tests. During the three months ended September 30, 2025, the number of AVISE® CTD tests delivered increased by approximately 16% over the same period in 2024 and increased sequentially by approximately 2% over the second quarter of 2025. Revenue growth for our testing products will depend, in part, on our ability to continue to expand our base of ordering healthcare providers and increase our penetration with existing healthcare providers, and on the success of the T-Cell Biomarkers and RA Sub-Profile Biomarkers which we added to our AVISE® CTD tests in January 2025.

Previous wording

While each of these areas present significant opportunities for us, they also pose significant risks and challenges that we must address. We discuss many of these risks, uncertainties and other factors in the section entitled"Risk Factors" in our 2024 Annual Report.

Current wording

While each of these areas present significant opportunities for us, they also pose significant risks and challenges that we must address. We discuss many of these risks, uncertainties and other factors that may affect our performance in the section entitled"Risk Factors" in our 2024 Annual Report.

Previous wording

▪Changes in U.S. Trade Policy. Our business, results of operations and financial condition may be adversely affected by uncertainty and changes in U.S. trade policies, including tariffs, quotas, trade agreements or other trade restrictions imposed by the U.S. or other governments. Our business requires access to reagents and other materials to run our tests, some of which we source from suppliers located outside the U.S., including Germany. Any imposition of or increase in tariffs or other restrictions on imports of reagents or other materials, as well as corresponding price increases for such materials available domestically, if any, could increase our costs. We would likely be unable to pass all or any such cost increases on to our customers and such cost increases could materially and adversely affect our business, results of operations and financial condition, including our gross margin.

Current wording

Our business, results of operations and financial condition may be adversely affected by uncertainty and changes in U.S. trade policies, including tariffs, quotas, trade agreements or other trade restrictions imposed by the U.S. or other governments. Our business requires access to reagents and other materials to run our tests, some of which we source from suppliers located outside the U.S., including Germany. Any imposition of or increase in tariffs or other restrictions on imports of reagents or other materials, as well as corresponding price increases for such materials available domestically, if any, could increase our costs. We would likely be unable to pass all or any such cost increases on to our customers and such cost increases could materially and adversely affect our business, results of operations and financial condition, including our gross margin.

Previous wording

Our ability to increase our revenue will depend on the success of the T-Cell Biomarker and RA Sub-Profile Biomarkers enhancements to our AVISE® CTD test, in addition to our ability to further penetrate the market for our current and future testing products and increase our reimbursement and collection rates (ASP) for tests delivered.

Current wording

Our ability to increase our revenue may depend, in part, on the success of the T-Cell Biomarker and RA and PAD4 Sub-Profile Biomarkers enhancements to our AVISE® CTD test, in addition to our ability to further penetrate the market for our current and future testing products and increase our reimbursement and collection rates (ASP) for tests delivered.

Previous wording

In the meantime, we have continued to submit Medicare claims for AVISE® Lupus, appeal denials and responses to requests for additional information. On January 31, 2024, CMS released a coverage article under which all multi-analyte proteomic testing will be considered within the scope of the Molecular Diagnostic Services Program administered by Palmetto GBA on behalf of CMS (MolDX) and reviewed through their technology assessment process. The article listed several such tests, including the AVISE® Lupus test, and requires all laboratories furnishing multi-analyte proteomics testing in MolDX jurisdictions to register with the DEX® Diagnostics Exchange Registry and obtain a Z-Code® identifier. We were issued a Z-Code® identifier in May 2024. To determine if the submitted tests are compliant with relevant policy requirements, these tests will undergo technical assessment by Palmetto GBA as part of the MolDX program. That technical assessment is on hold until such time as an LCD is issued by CMS. In the interim, our current status with CMS will remain unchanged.

Current wording

In the meantime, we have continued to submit Medicare claims for AVISE® Lupus, appeal denials and responses to requests for additional information. On January 31, 2024, CMS released a coverage article under which all multi-analyte proteomic testing will be considered within the scope of the Molecular Diagnostic Services Program administered by Palmetto GBA on behalf of CMS (MolDX) and reviewed through their technology assessment process. The article listed several such tests, including the AVISE® Lupus test, and requires all laboratories furnishing multi-analyte proteomics testing in MolDX jurisdictions to register with the DEX® Diagnostics Exchange Registry and obtain a Z-Code® identifier. We were issued a Z-Code® identifier in May 2024. To determine if the submitted tests are compliant with relevant policy requirements, these tests will undergo technical assessment by Palmetto GBA as part of the MolDX program. That technical assessment is on hold until such time as an LCD is issued by CMS. In the interim, we expect our current status with CMS to remain unchanged.

Previous wording

During the year ended December 31, 2023, we implemented several revenue cycle management initiatives, including among others, withholding the submission of commercial payor claims for reimbursement until subsequent quarters, increasing appeals efforts, adjusting the documentation required of physicians when ordering our tests and implementing increases to our patient payment rates. Additionally, in November 2023, we increased the list price billed for our tests. These ongoing revenue cycle management initiatives aim to optimize our appeals process and the potential for cash collections. During the fiscal year ended December 31, 2024, we experienced moderate declines in test volume since the second half of the fiscal year ended December 31, 2023, as rheumatologists and patients adjusted to these changes. During the first half of 2025, we saw a return to volume growth. The number of AVISE® CTD tests delivered during the three months ended June 30, 2025 improved by approximately 7% as compared to the number of AVISE® CTD tests delivered during the three months ended June 30, 2024 due continuing physician demand and adoption, early traction from our new biomarkers, and salesforce expansion. Additionally, the trailing-twelve-month ASP of our AVISE® CTD tests increased by approximately 7% during the three months ended June 30, 2025 compared to the same period in 2024.

Current wording

During the year ended December 31, 2023, we implemented several revenue cycle management initiatives, including among others, withholding the submission of commercial payor claims for reimbursement until subsequent quarters, increasing appeals efforts, adjusting the documentation required of physicians when ordering our tests and implementing increases to our patient payment rates. Additionally, in November 2023, we increased the list price billed for our tests. These ongoing revenue cycle management initiatives aim to optimize our appeals process and the potential for cash collections. During the fiscal year ended December 31, 2024, we experienced moderate declines in test volume since the second half of the fiscal year ended December 31, 2023, as rheumatologists and patients adjusted to these changes. During the first three quarters of 2025, we saw a return to volume growth. The number of AVISE® CTD tests delivered during the three months ended September 30, 2025 improved by approximately 16% as compared to the number of AVISE® CTD tests delivered during the three months ended September 30, 2024 due to continuing physician demand and adoption, early traction from our new biomarkers, and salesforce expansion. Additionally, the trailing-twelve-month ASP of our AVISE® CTD tests increased by approximately 9% during the three months ended September 30, 2025 compared to the same period in 2024.

Previous wording

Revenue increased $2.1 million, or 14.2%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to ASP expansion driven primarily by our new biomarkers, and, to a lesser extent, an increase in test volume. The number of AVISE® CTD tests delivered in the three months ended June 30, 2025 increased by approximately 7% compared to the same period in 2024.

Current wording

Revenue increased $4.7 million, or 37.9%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, due to an increase in test volume and continued ASP expansion. The number of AVISE® CTD tests delivered in the three months ended September 30, 2025 increased by approximately 16% compared to the same period in 2024. In addition, our AVISE® CTD trailing twelve-month ASP increased by $37 per test to $441 per test in the third quarter of 2025 from $404 per test in the third quarter of 2024.

Previous wording

Cost of revenue increased $0.8 million, or 13.3%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. This increase was primarily due to increases of $0.8 million in materials and supplies related to our new biomarkers and $0.1 million in employee-related expenses (including salaries, benefits and stock-based compensation) related to increased headcount, partially offset by a decrease of $0.1 million in shipping and handling costs.

Current wording

Cost of revenue increased $1.6 million, or 29.7%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. This increase was primarily due to increases in materials and supplies related to our new biomarkers and employee-related expenses (including salaries, benefits and stock-based compensation) related to increased headcount, and in facility-related expenses.

Previous wording

Gross margin as a percentage of revenue increased slightly to 60.4% for the three months ended June 30, 2025 compared to 60.1% for the three months ended June 30, 2024, primarily due to ASP expansion driven by our new biomarkers and improved overhead absorption.

Current wording

Gross margin as a percentage of revenue increased slightly to 58.4% for the three months ended September 30, 2025 compared to 55.8% for the three months ended September 30, 2024, primarily due to ASP expansion driven by our new biomarkers and improved overhead absorption.

Previous wording

Selling, general and administrative expenses increased $1.1 million, or 10.3%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. This increase was primarily due to an increase of $0.5 million in employee-related expenses (including salaries, benefits and stock-based compensation) related to increased headcount, and an increase of $0.3 million in outside services, and an increase of $0.3 million in other expenses.

Current wording

Selling, general and administrative expenses increased $1.3 million, or 12.6%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. This increase was primarily due to an increase in employee-related expenses (including salaries, benefits, travel and stock-based compensation) related to increased headcount, and an increase in outside services and facilities expense, partially offset by a decrease in other expenses.

Previous wording

Interest expense increased by $0.6 million, including an increase of $0.2 million in non-cash interest expense, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to the Perceptive Term Loan Facility that we entered into in April 2025.

Current wording

Interest expense increased by $0.8 million, including an increase of $0.3 million in non-cash interest expense, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to the Perceptive Term Loan Facility that we entered into in April 2025 and the embedded finance lease related to the Amended Supply Agreement. We expect to continue to incur this interest expense under the Perceptive Term Loan Facility.

Previous wording

The fair value of the warrant liability increased by $0.4 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to increases in the fair value of the underlying common stock.

Current wording

The fair value of the warrant liability increased by $2.7 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to increases in the fair value of the underlying common stock.

Previous wording

Comparison of the Six Months Ended June 30, 2025 and 2024 (in thousands):

Current wording

Comparison of the Nine Months Ended September 30, 2025 and 2024 (in thousands):

Previous wording

Revenue increased $3.2 million, or 10.9%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to ASP expansion driven primarily by our new biomarkers, and, to a lesser extent, an increase in test volume. The number of AVISE® CTD tests delivered in the six months ended June 30, 2025 increased by approximately 5% compared to the same period in 2024.

Current wording

Revenue increased $8.0 million, or 19.0%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, due to continued ASP expansion, and an increase in test volume. The number of AVISE® CTD tests delivered in the nine months ended September 30, 2025 increased by approximately 8% compared to the same period in 2024. In addition, our AVISE® CTD trailing twelve-month ASP increased by $37 per test to $441 per test in the third quarter of 2025 from $404 per test in the third quarter of 2024.

Previous wording

Cost of revenue increased $1.4 million, or 11.5%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. This increase was primarily due to increases of $1.3 million in materials and supplies and $0.6 million in employee-related expenses (including salaries, benefits and stock-based compensation) related to increased headcount, partially offset by decreases of $0.2 million in shipping and handling costs, $0.1 million in royalties, $0.1 million in facilities and $0.1 million in outside services.

Current wording

Cost of revenue increased $3.0 million, or 17.3%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. This increase was primarily due to increases in materials and supplies, related to our new biomarkers, increases in employee-related expenses (including salaries, benefits and stock-based compensation) related to increased headcount, as well as increased in facilities and other expenses, partially offset by decreases in shipping and handling costs, royalties, and outside services.

Previous wording

Selling, general and administrative expenses increased $1.7 million, or 8.3%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. This increase was primarily due to an increases of $1.0 million in employee-related expenses (including salaries, benefits and stock-based compensation) related to increased headcount, $0.4 million in other expenses, $0.2 million in outside services, partially offset by a decrease of $0.2 million in facilities.

Current wording

Selling, general and administrative expenses increased $3.0 million, or 9.7%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. This increase was primarily due to increases in employee-related expenses (including salaries, benefits and stock-based compensation) related to increased headcount, as well as increased travel expenses and outside services, partially offset by a decrease in facilities-related expenses.

Previous wording

Research and development expenses increased $0.3 million, or 25.8%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. This increase was primarily due to an increase of $0.2 million in employee-related expenses (including salaries, benefits and stock-based compensation) and an increase of $0.1 million in outside services.

Current wording

Research and development expenses increased $0.8 million, or 20.9%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. This increase was primarily due to increases in employee-related expenses (including salaries, benefits and stock-based compensation), and outside services and other expenses.

Previous wording

Interest expense increased by $0.6 million, including an increase of $0.2 million in non-cash interest expense, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to the Perceptive Term Loan Facility that we entered into in April 2025.

Current wording

Interest expense increased by $1.3 million, including an increase of $0.5 million in non-cash interest expense, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily due to the Perceptive Term Loan Facility that we entered into in April 2025 and the embedded finance lease related to the Amended Supply Agreement. We expect to continue to incur this interest expense under the Perceptive Term Loan Facility.

Previous wording

Loss on extinguishment of debt increased by $0.3 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, as a result of our early payoff of all outstanding indebtedness under the Amended Loan Agreement in April 2025.

Current wording

Loss on extinguishment of debt increased by $0.3 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, as a result of our early payoff of all outstanding indebtedness under the Amended Loan Agreement in April 2025.

Previous wording

The fair value of the warrant liability increased by $0.4 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to increases in the fair value of the underlying common stock.

Current wording

The fair value of the warrant liability increased by $3.1 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily due to increases in the fair value of the underlying common stock.

Previous wording

We have incurred net losses since our inception. For the six months ended June 30, 2025 and 2024, we incurred a net loss of $8.2 million and $6.3 million, respectively, and we expect to incur additional losses in future periods. To date, we have generated only limited revenue, and despite any estimates we may make regarding our ability to become profitable, we may never achieve revenue sufficient to offset our expenses. As of June 30, 2025, we had an accumulated deficit of $302.5 million and cash and cash equivalents of $30.0 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our funds are held in cash. We held claims in the first quarter of the fiscal year ending December 31, 2025, which resulted in increases in its accounts receivable and an accelerated decrease in its cash and cash equivalents in the first quarter of the fiscal year ending December 31, 2025 and a reversal of that trend is expected in the remaining two quarters of the fiscal year ending December 31, 2025. A total of an additional $50.0 million is available at our option under the Perceptive Term Loan Facility should we attain specified revenue levels and satisfy other conditions.

Current wording

We have incurred net losses since our inception. For the nine months ended September 30, 2025 and 2024, we incurred a net loss of $15.3 million and $11.4 million, respectively, and we expect to incur additional losses in future periods. To date, we have generated only limited revenue, and despite any estimates we may make regarding our ability to become profitable, we may never achieve revenue sufficient to offset our expenses. As of September 30, 2025, we had an accumulated deficit of $309.6 million and cash and cash equivalents of $35.7 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our funds are held in cash. We held claims in the first quarter of the fiscal year ending December 31, 2025, which resulted in increases in its accounts receivable and an accelerated decrease in its cash and cash equivalents in the first quarter of the fiscal year ending December 31, 2025 and a reversal of that trend has occurred in the second and third quarters and is expected to continue in the remaining quarter of the fiscal year ending December 31, 2025. A total of an additional $50.0 million is available at our option under the Perceptive Term Loan Facility should we attain specified revenue levels and satisfy other conditions.

Previous wording

Our obligations under the Perceptive Term Loan Facility are secured by a first-priority lien on substantially all of our existing and future assets. In connection with the Credit Agreement, we have issued the Warrant Certificate to Perceptive. The Warrant Certificate has a ten-year term from the applicable issuance date and includes customary anti-dilution and registration rights provisions. The Perceptive Term Loan Facility includes customary affirmative, negative, and financial covenants. These include, among others, restrictions on additional indebtedness, liens, dividends, mergers and acquisitions, and affiliate transactions. The Perceptive Term Loan Facility also requires that we maintain a minimum unrestricted cash balance of $3.0 million and achieve specified net revenue levels on a quarterly basis beginning with the quarter ending June 30, 2025. In addition, upon the occurrence of an event of default, Perceptive, among other things, can declare all indebtedness due and payable immediately, which would adversely impact our liquidity and reduce the availability of our cash flows to fund working capital needs, capital expenditures and other general corporate purposes. As of June 30, 2025, we were in compliance with all covenants of the Perceptive Term Loan Facility.

Current wording

Our obligations under the Perceptive Term Loan Facility are secured by a first-priority lien on substantially all of our existing and future assets. In connection with the Credit Agreement, we have issued the Warrant Certificate to Perceptive. The Warrant Certificate has a ten-year term from the applicable issuance date and includes protection for certain dilutive issuances and registration rights provisions. The Perceptive Term Loan Facility includes customary affirmative, negative, and financial covenants. These include, among others, restrictions on additional indebtedness, liens, dividends, mergers and acquisitions, and affiliate transactions. The Perceptive Term Loan Facility also requires that we maintain a minimum unrestricted cash balance of $3.0 million and achieve specified net revenue levels on a quarterly basis beginning with the quarter ending June 30, 2025. In addition, upon the occurrence of an event of default, Perceptive, among other things, can declare all indebtedness due and payable immediately, which would adversely impact our liquidity and reduce the availability of our cash flows to fund working capital needs, capital expenditures and other general corporate purposes. As of September 30, 2025, we were in compliance with all covenants of the Perceptive Term Loan Facility.

Previous wording

On September 15, 2022, we entered into the Sales Agreement with TD Securities, as sales agent, pursuant to which the Company may offer and sell, from time to time, shares of Company common stock having an aggregate offering price of up to $50.0 million. The Company is not obligated to sell any shares of the Company's common stock in the offering and, as of June 30, 2025, the Company has not sold any shares of its common stock pursuant to the Sales Agreement.

Current wording

On September 15, 2022, we entered into the Sales Agreement with TD Securities, as sales agent, pursuant to which we may offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $50.0 million. We are not obligated to sell any shares of the Company's common stock in the offering. During the three months ended September 30, 2025, we have sold 360,554 shares of common stock under the Sales Agreement at an average per share price of $9.82, for gross proceeds of approximately $3.5 million and net proceeds of approximately $3.4 million after deducting $0.1 million in commissions paid to TD Securities and other offering expenses payable by us.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2025 was $13.6 million, primarily resulting from (i) our net loss of $8.2 million adjusted for non-cash charges of $3.9 million primarily related to stock-based compensation, depreciation, amortization, change in fair value of warrant liability, loss on extinguishment of debt, bad debt expense, non-cash lease expense and non-cash interest and (ii) changes in our net operating assets of $9.2 million primarily related to net increases in accounts receivable and net decreases in accrued and other current liabilities and accounts payable, partially offset by net decreases in prepaid expenses and other current assets. Net cash used in operating activities for the three months ended June 30, 2025 was $2.9 million, which is a $7.8 million decrease compared to the first quarter of 2025.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2025 was $10.6 million, primarily resulting from (i) our net loss of $15.3 million adjusted for non-cash charges of $7.9 million primarily related to stock-based compensation, depreciation, amortization, change in fair value of warrant liability, loss on extinguishment of debt, bad debt expense, non-cash lease expense and non-cash interest and (ii) changes in our net operating assets of $3.3 million primarily related to net increases in accounts receivable and net decreases in operating lease liabilities and accrued and other current liabilities and accounts payable, partially offset by net decreases in prepaid expenses and other current assets and other assets.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2024 was $11.5 million, primarily resulting from (i) our net loss of $6.3 million adjusted for non-cash charges of $2.8 million primarily related to stock-based compensation, depreciation, amortization and non-cash lease expense and (ii) changes in our net operating assets of $7.9 million primarily related to net increases in accounts receivable and net decreases in accounts payable, operating lease liabilities and accrued and other current liabilities, partially offset by net decreases in prepaid expenses. The increase in accounts receivable was primarily due to delays in claim submission as part of our revenue cycle management initiatives.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2024 was $13.6 million, primarily resulting from (i) our net loss of $11.4 million adjusted for non-cash charges of $3.7 million primarily related to stock-based compensation, depreciation, amortization and non-cash lease expense and (ii) changes in our net operating assets of $6.0 million primarily related to net increases in accounts receivable and net decreases in accounts payable, operating lease liabilities and accrued and other current liabilities, partially offset by net decreases in prepaid expenses. The increase in accounts receivable was primarily due to delays in claim submission as part of our revenue cycle management initiatives.

Previous wording

Net cash used in investing activities for the six months ended June 30, 2025 and 2024 was $0.3 million and $0.2 million, respectively, due to net purchases of property and equipment.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2025 and 2024 was $0.6 million and $0.4 million, respectively, due to net purchases of property and equipment.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2025 was $21.9 million, primarily resulting from $23.7 million in proceeds from the issuance of debt and warrants, net of discounts, $18.8 million in proceeds from common stock issued, net of issuance costs and $0.2 million in proceeds from common stock issued under the ESPP, partially offset by a $19.7 million payment to early extinguish debt, $0.7 million in payments of debt issuance costs, $0.3 million in principal payments on notes payable obligations, and $0.1 million in principal payments on finance lease obligations.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2025 was $24.8 million, primarily resulting from $23.7 million in proceeds from the issuance of debt and warrants, net of discounts, $18.6 million in proceeds from common stock issued in public offering, net of issuance costs, $3.4 million in proceeds from common stock issued under the Sales Agreement with TD Securities, net of issuance costs, and $0.4 million in proceeds from common stock issued under the ESPP, partially offset by a $19.7 million payment to early extinguish debt, $0.9 million in payments of debt issuance costs, $0.4 million in principal payments on notes payable obligations, and $0.3 million in principal payments on finance lease obligations.

Previous wording

Net cash used in financing activities for the six months ended June 30, 2024 was $0.3 million, primarily resulting from payments on finance lease and notes payable obligations, partially offset by proceeds from purchases under the Company's ESPP.

Current wording

Net cash used in financing activities for the nine months ended September 30, 2024 was $0.4 million, primarily resulting from payments on finance lease and notes payable obligations, partially offset by proceeds from purchases under our ESPP.

Previous wording

For a description of our critical accounting estimates, please see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" contained in our 2024 Annual Report. There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2025 as compared to the critical accounting policies and estimates disclosed in the Management’s Discussion and Analysis of Financial Condition and Operations included in our 2024 Annual Report.

Current wording

For a description of our critical accounting estimates, please see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" contained in our 2024 Annual Report. There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2025 as compared to the critical accounting policies and estimates disclosed in the Management’s Discussion and Analysis of Financial Condition and Operations included in our 2024 Annual Report.